Information and Disclaimer
This interpretation letter was issued based on the specific circumstances or situation of a taxpayer or vendor and the law and tax policy in effect at the time the ruling was issued. Specific facts relevant to your situation may change the application of the tax. In accordance with the Freedom of Information and Protection of Privacy Act, all confidential and identifying information has been removed from this interpretation letter. Please be aware that any statute or policy referred to in this letter may have been superseded. Where a letter contains links to a publication, the link is to our current publication on that subject, regardless of the date that the ruling was originally issued, and the current publication may not be reflective of the information originally provided. In no event shall the Government of Ontario be liable for any damages whatsoever arising out of, or in connection with, the use of the information contained herein.
Interpretation Letter TC-0006, February 2004
Thank you for your letter dated December 1, 2003 regarding the application of Ontario retail sales tax
(RST) to after hours answering service needs.
This interpretation is based on the information provided and which is conveyed in the "Understanding of
Facts" portion of this ruling. Please review the information for its completeness and accuracy. If it is
determined that the information is incomplete or inaccurate, this interpretation will not be binding. In the
event that our understanding of the facts is incomplete or inaccurate, please notify the undersigned, in
writing, so that we may reconsider our opinion.
Understanding of Facts
It is our understanding that for the past three years, Company A has been using the services of Company
B for their after hours answering service needs.
The arrangement that Company A has with Company B is as follows:
- calls are answered when the office is closed.
- Company B is instructed to contact Company A with a message only in case of an emergency. An emergency may happen four or five times per month during the paving season.
- When Company A wishes to retrieve its messages, Company A will place a call to Company B who in turn will fax the taken messages back to Company A.
Further to our telephone conversation of January 26, 2004, Company A has faxed a copy of a service
agreement dated March 8, 2001 for communication services. The covering letter indicates that, although
"Trial Agreement" is written on the bottom of the agreement, Company A continued without signing
another agreement as Company A was satisfied with the services.
We note that the box "page only if urgent" has been checked off. The special instructions outlined in the
agreement state to "relay or patch calls only if an emergency or if a customer is cancelling an
appointment. Never give out home phone, patch or relay instead."
Company A is enquiring on the application of RST and GST to the entire bill for these after hours
answering service charges.
Please note that the Ministry of Finance does not administer the federal Goods and Services Tax (GST).
For information on the GST you may wish to contact the Canada Revenue Agency at 1 800 959-5525 or
visit their website at www.cra.gc.ca
Legislation and/or Administrative Policy
The Ontario Retail Sales Tax Act (Act) imposes RST at the rate of 8% on the purchaser of a taxable
service.
The definition of "taxable service" in section 1 of the Act includes telecommunication services of all kinds,
including without restricting the generality of the foregoing, telephone and telegraph services, community
antenna television and cable television, transmissions by microwave relay stations or by satellite, and pay
television, but not including public broadcasting services that are broadcast through the air for direct
reception by the public without charge.
"Telecommunication" is defined in section 1 of the Act to mean any transmission, emission or reception of
signs, signals, writing, images or sound or intelligence of any nature by wire, radio, visual or other
electromagnetic or laser-based system, but does not include any transmission, emission or reception or
class thereof that is prescribed by the Minister to be excluded for the purpose of this paragraph;
Section 5 of Regulation 1012 of the Act prescribes the following telecommunication exclusion,
For the purpose of the definition of "telecommunication" in section 1 of the Act,
"telecommunication" does not include any transmission, emission or reception of a class of signs,
signals, writing, images or sound or intelligence of any nature to provide a telecommunication
service for which a charge is made by a person who, in part,
(c) on or after the 1st day of April, 1993 provides a service that will take messages for a person who must contact the service by phone, voice-mail box, facsimile or computer in order to be advised of the messages taken, and that is not a paging service.
An answering service is a non-taxable service if it involves only taking messages for clients who retrieve
the messages without being contacted by the service provider. If clients are paged to retrieve messages
either through beepers or their pagers, the service is a taxable paging service.
The RST Branch considers a paging service to be a service that contacts clients directly to advise them of
messages. The client may be informed of the message by voice or by other communication means.
Analysis and Conclusion
An answering service is a non-taxable service if it involves only taking messages for clients who retrieve
the messages without being contacted by the service provider. If clients are contacted by any method to
be advised of their messages, the service will be subject to RST as a paging service.
If the charge for services consists of both taxable paging and non-taxable answering services, a
reasonable breakdown of the charges must be made so that RST would apply only to the charge for
paging services. Otherwise, RST could apply to the total charge.
Based upon the review of the agreement and the invoice, as there is no breakdown of the charges
separating the paging services from the answering services, Company B has correctly charged the RST.
